Govt opens tender of 10 oil, gas blocks
Fitri Wulandari, Jakarta
The tender process officially began on Monday for 10 oil and gas block acreages, and offer a better production split and incentives for investors.
Iin Arifin Takhyan, director general of oil and gas at the Ministry of Energy and Mineral Resources, said the incentives and higher production split were aimed at luring investors.
The 10 oil and gas acreages being offered are the Lhokseumawe block in Aceh province, Ujung Kulon in Banten, East Java's Northeast Madura III, Northeast Madura IV, Northeast Madura V, East Nusa Tenggara Rote I, Rote II, Maluku's Babar and Selaru, and Manokwari in Papua province.
Interested investors can obtain bidding information starting from July 6. Bidding documents must be submitted by Sept. 30.
Bid winners will be announced in October, followed by the signing of contracts.
Iin said that major oil and gas investors such as U.S. ExxonMobil Oil Indonesia and PT Caltex Pacific Indonesia had shown interest in three of the blocks, namely Northeast Madura III, IV and V.
"The Java area is considered a hot spot because there are more new oil and gas findings," Iin said.
The government is offering a higher production split of 35 percent for oil and 40 percent for natural gas for the following blocks: Rote I and II, Babar, Selaru and Manokwari. The government is offering a higher split because these acreages are located in remote areas.
"This is a very generous offer," Iin said.
Investors normally get a 15 percent revenue split from oil investment, and 30 percent from gas.
The government is also offering fiscal incentive for the development of the Lhokseumawe, Ujung Kulon, Rote I and II, Babar, Selaru and Manokwari blocks.
Iin did not provide details on this, only saying that the incentive was aimed at luring investment in developing gas fields amid high demand for natural gas.
Bidding for the 10 blocks was supposed to start last year, but the government delayed it as the Ministry of Finance wanted to impose value-added tax on the importation of equipment used in oil and gas exploration.
The Ministry of Mineral Resources and Energy has said that the tax plan was opposed by oil and gas companies as it would increase the cost of exploration work while there was no guarantee the results would be successful.
The companies currently pay the tax only after commercial production.
Iin said his office was continuing talks with the Ministry of Finance, but it would not hamper the tender of the oil and gas blocks.
The government will open a second round of bidding for another 10 oil and gas blocks later this year.
Indonesia has been struggling to boost investment in the oil and gas sector, chiefly to lift sagging oil production.
Current oil production reaches 1.072 million barrels per day, including condensate which is lower than the output quota set by the Organization of Exporting Petroleum Countries (OPEC).
Indonesia is the only Southeast Asian country that is a member of OPEC.